Explain each line of a payslip and how your gross pay turns into the amount paid into your bank.
Most people go month after month without finding out what the lines on their payslip mean. The usual check is a glance at the figure at the bottom: if it is close to what you expected, the file gets closed. If you can give the reason for every line, you can confirm the payslip is correct and catch the month when something on it is off.
Employers must give an itemised payslip to all employees covered by the Employment Act, under rules set by the Ministry of Manpower (MOM). Most people in private-sector jobs now fall under the Act. MOM sets out which items the payslip has to show. For the complete list, and for the rules on how soon the payslip has to reach you, go to MOM's website.
Two figures frame everything else. Gross pay is your salary together with anything else earned that month, counted before deductions. Net pay, which people also call take-home pay, is the amount that lands in your bank account. A deduction is any item that sits between those two figures, and you should be able to say why each one is there.
Hui Min has just started her first job at S$4,000 a month (her figures throughout are invented and are not current CPF rates). On the last working day of the month a PDF payslip comes through and S$3,198 shows up in her bank account. Her contract states S$4,000. She knows part of the difference is CPF, and she thinks tax must be taken somewhere, but she couldn't explain the payslip line by line.
Going down the page: basic salary S$4,000, allowances nil, overtime nil, so gross pay is S$4,000. Two deductions follow, S$800 of employee CPF and S$2 for the CDAC fund. Subtracting both gives S$4,000 - S$800 - S$2 = S$3,198, the same figure as her bank deposit. Lower down, a line marked as information shows employer CPF of S$680.
The S$800 is her own CPF share. The S$680 is paid by her employer straight into her CPF, so in this month S$800 + S$680 = S$1,480 goes into her CPF in total. The line she finds hardest to explain is the S$2 for CDAC.
Of all the deductions, employee CPF takes the most. Because it comes out of gross pay before you are paid, what you take home is less than your salary. The employer share is paid in addition to your salary, does not reduce your pay, and is shown on the payslip only for your information. That money goes directly into your CPF accounts without ever reaching your bank account.
Both rates are set by the CPF Board and vary with your age. The Board also caps the wages that attract CPF; Lesson 2.3 explains the ceilings. You'll find current figures at cpf.gov.sg, along with a contribution calculator for checking your own deduction. For the planning view of the two shares, see Lesson 2.1 of the course "The Singapore personal finance system, end to end", titled "From gross pay to take-home pay: where CPF fits". CPF is for Singapore citizens and permanent residents. Someone working here on a work pass has no CPF line at all, so their gross and net pay sit much closer together.
CDAC is one of four community self-help groups funded through payroll deductions, alongside MBMF, SINDA and ECF. The group your contribution goes to depends on your race or religion. When your employer pays CPF, this deduction is made by default. It is a small amount that goes up in set tiers as wages rise, and each group publishes its own tiers. To change or stop it, you apply to the group directly; whether you keep paying is up to you. When reading a payslip, you need to recognise the line, compare the amount with the group's published table, and not confuse it with tax.
Hui Min won't find an income tax line on this payslip or on any later one. Monthly pay for a resident employee in Singapore has no income tax taken from it. IRAS works out your tax once a year, after the year has ended, and then sends a bill. For a new worker, the first bill comes in the year after they start, so Hui Min's will arrive the year after she began this job. You pay that bill from money you have already been paid, so your take-home pay is not all free to spend. Lesson 4.1, "Start from take-home pay and next year's tax bill", shows you how to estimate the bill and put money aside for it every month.
Some months bring extra lines. Roles that qualify for overtime show the hours worked and the rate paid. Transport, meal and similar allowances are listed separately. A first payslip may carry a deduction for unpaid leave or a late start, and the amount should match the days you didn't work. Claims paid back through payroll have a line of their own. December may include an AWS line with a separate CPF deduction, explained in Lesson 2.3.
Each line ought to lead back to a source: a clause in your contract, a form you handed in, or a day you were away. If you can't find the source, the line may still be right, but you should ask your employer about it.
Use this sequence on any payslip:
Start with gross pay, which is salary plus anything else earned in the month. List every deduction between gross and net and give the reason for each. Compare the employee CPF figure with the rate for your age, using the contribution calculator at cpf.gov.sg. Read employer CPF as information. It is paid on top and is not taken from your pay. Compare the self-help group amount with that group's published tier table. Keep in mind that income tax is not deducted here, and plan for the yearly IRAS bill. Match every remaining line to a contract clause, a submitted form or an absence, and ask about any you can't match.
Lesson 2.4, "Check your payslip against your contract and CPF statement", makes this into something you do every month.
Find your latest payslip now, or use Hui Min's if you haven't been paid yet. Have a pen ready, because you're about to label every line on it.
Label every line on your latest payslip, or on Hui Min's from the lesson. Write down any line you can't explain.
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